Nature’s Sunshine Products Reports 2019 Q1 Net Sales Growth – Up 4.3% to $91.3M

Nature’s Sunshine Products, Inc. (NASDAQ: NATR), a leading natural health and wellness company engaged in the manufacture and sale of nutritional and personal care products, recently reported its financial results for the first quarter ended March 31, 2019.

First Quarter 2019 Highlights

• First quarter net sales increased 4.5 percent to $91.3 million from $87.3 million in the prior year
• Key drivers of first quarter top-line growth included Synergy Worldwide up 10.0 percent, NSP Russia, Central and Eastern Europe up 18.9 percent and NSP China up 52.4 percent
• First quarter GAAP net income was $1.7 million compared to $0.3 million in the prior year
• First quarter GAAP net income per diluted share was $0.09 compared to $0.03 per diluted share in the prior year
• First quarter adjusted net income per share was $0.14 compared to $0.03  per share in the prior year
• First quarter Adjusted EBITDA increased to $7.3 million from $4.0 million in the prior year

Net sales of $91.3 million increased 4.5 percent compared to $87.3 million in the first quarter of 2018. Net sales were also negatively impacted by $2.3 million of unfavorable foreign currency exchange rate fluctuations.

On a local currency basis, net sales increased 7.1 percent compared to 2018. The increase was primarily related to growth in Synergy Asia Pacific, NSP Russia, Central and Eastern Europe and NSP China offset by a $3.2 million decline in net sales in NSP Americas and a $0.9 million decline in Synergy Europe.

Gross margin, as a percentage of net sales, increased to 74.3 percent from 74.0 percent in the first quarter of 2018. The increase in gross margin as compared to the prior year was primarily driven by changes in market mix and reserves for obsolete inventory recorded in the prior year.

Volume incentives, as a percentage of net sales, decreased to 34.0 percent from 35.9 percent in the first quarter of 2018. The decrease in volume incentives as a percent of net sales is primarily due to changes in market mix, reflecting growth in markets where volume incentives as a percentage of net sales are lower than the consolidated average, and the growth in NSP China where sales commissions to independent service providers are included in selling, general and administrative expenses (“SG&A”).

SG&A expenses increased by approximately $1.5 million to $33.9 million for the first quarter of 2019. The increase in SG&A expenses is primarily due to increase in independent service fees in China and restructuring expenses. As a percentage of net sales, SG&A expenses were 37.1 percent for both the current period and the same period in 2018. Excluding the impact of restructuring related expenses, first quarter of 2019 SG&A expenses as a percentage of net sales were 35.4 percent.

Operating income in the first quarter of 2019 was $3.0 million, or 3.3 percent of net sales, as compared to $0.9 million, or 1.0 percent of net sales in the first quarter of 2018. Excluding non-recurring items noted below, operating income was $4.6 million, or 5.0 percent of net sales, compared to a $0.9 million, or 1.0 percent of net sales in the prior year period.

Other income (loss), net, in the first quarter of 2019 was a loss of $48,000 compared to income of $0.7 million in the first quarter of 2018. The provision for income taxes was $1.2 million in the first quarter of 2019 compared to $1.3 million in the first quarter of 2018.

Balance Sheet and Cash Flow

Net cash used in operating activities was $4.6 million for the three months ended March 31, 2019, compared to $3.7 million provided in the prior year period. Capital expenditures during the quarter ended March 31, 2019 totaled $0.4 million compared to $0.5 million in the same period of 2018. The Company ended the first quarter of 2019 with cash and cash equivalents of $45.4 million.

Management Commentary

“We are pleased to report a strong start to fiscal 2019 with continued net sales growth and significantly improved earnings. Growth continues to be driven by sustained positive sales trends in NSP China, Synergy Asia Pacific and NSP Russia, Central and Eastern Europe, as well as positive growth in Synergy North America during the first quarter,” stated Terrence Moorehead, Chief Executive Officer.

“We are seeing an enhanced profit profile, reflecting the benefits of our cost control initiatives that contributed to a more than an eighty-one percent increase in adjusted EBITDA during the first quarter. We continue to focus on growth while controlling costs and streamlining the organization to drive accelerated earnings gains. We have further opportunities to improve expense infrastructure, all while aligning our global organization to deliver upon our strategic growth goals.”

About Nature’s Sunshine Products

Nature’s Sunshine Products (NASDAQ: NATR), a leading natural health and wellness company, markets and distributes nutritional and personal care products through a global direct sales force of approximately 494,000 independent Managers, Distributors and Customers in more than 40 countries. Nature’s Sunshine manufactures most of its products through its own state-of-the-art facilities to ensure its products continue to set the standard for the highest quality, safety and efficacy on the market today. The Company has four reportable business segments that are divided based on the characteristics of their Distributor base, similarities in compensation plans, as well as the internal organization of NSP’s officers and their responsibilities (NSP Americas; NSP Russia, Central and Eastern Europe; Synergy WorldWide; and NSP China).